A loan backing Bethesda’s Westfield Montgomery, one of the largest malls in the D.C. region that has been slated for redevelopment, was transferred to special servicing this month.

It comes four months before Unibail-Rodamco-Westfield’s $350M loan, secured by the vast majority of the 1.3M SF mall, is set to mature, per a Morningstar Credit report.

“URW is exploring extension and refinancing options for its CMBS loan on Westfield Montgomery, one of its top performing US Flagship assets, ahead of its maturity on 1st August 2024,” a URW spokesperson told Bisnow in a statement. “As is standard ahead of extension discussions with lenders, the loan has been transferred to special servicing.”

The property, owned by Paris-based URW, was approved for a major redevelopment in the summer of 2020. That project, which called for 2.9M SF of retail and 717 residential units, still hasn't begun construction.

Despite being 94% occupied in 2023, up from 76% the year before, the mall’s net cash flow last year was 10% below 2022 and 29% below when the property was underwritten, according to Morningstar Credit. It attributed that cash flow drop to a “combination of declining revenue and increased expenses.”

URW secured the 10-year, interest-only loan in 2014. The loan is tied to 836K SF of the property, a footprint that excludes the mall’s anchor tenants, Nordstrom, Macy’s and Macy’s Home. Nordstrom operates on a ground lease expiring in October 2025, per Morningstar.

“The existing loan pays interest at 3.77%, so with where rates are at now, refinancing in this environment would probably be at a rate 350 bps higher,” Morningstar Credit Senior Vice President David Putro wrote in an email to Bisnow.

In December, URW refinanced its 2M SF Garden State Plaza property in New Jersey for $525M at a 6.75% interest rate. It has plans to redevelop that mall with new multifamily units as well.

The mall giant seems to have reversed course on plans to sell its $13.2B U.S. portfolio after announcing in 2022 it planned to divest by the end of 2023. While it has sold some assets, URW still holds 16 properties across the U.S.